Investment management is by nature a fairly rigid discipline; in order to approach a broad customer base, an investment manager has to offer a specific type of strategy, appeal to a specific type of customer, and has to disclose to that customer everything the customer needs to evaluate the risk and opportunity.
This process seems to work pretty well for the preponderance of long-only investment managers in stocks and bonds. But what if a manager wants to approach a broader set of customers with an alternative strategy, while staying within the realm of the law and avoiding fines and suspensions from regulators? And, in a strong market, what if the only way the manager can remain profitable over time relative to passive management is to offer this strategy?
The answer here is the liquid alternative universe. We covered the rise of this new investment vehicle, as well as the surprising impact its transparency requirements may have on issuers (hint – now we actually have a way to know who’s shorting stocks), in the Better IR newsletter.